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If the price level increases, the money demand curve will
a. shift leftward
b. become steeper
c. remain in the same position; however, there will be movement upward along the
curve
d. shift rightward
e. remain in the same position; however, there will be movement downward along the
curve
Which of the following cities does not have a Federal Reserve Bank?
a. Dallas
b. Kansas City
c. Los Angeles
d. Cleveland
e. Miami
Which of the following is not a reason why wages respond slowly to changes in output?
a. Many labor contracts specify wages for up to three years.
b. The process of wage setting in large corporations is slow moving.
c. Frequent wage changes can reduce worker morale and reduce productivity.
d. Firms benefit from having a reputation of paying stable wages.
e. The labor supply and demand curves move rapidly to clear labor markets.
A new tool that the Fed started using in late 2008 was that it began to pay interest on the
reserves banks hold in their federal reserve accounts.
The natural rate of unemployment in the United States
a. has consistently equaled 6 percent
b. has increased as the federal budget deficit has fallen
c. is similar to the natural rate in European countries
d. has increased in recent years
e. is now unusually high because so many women have entered the labor force
If Social Security is over-indexed, real payments
a. are lower than they would be if they were correctly indexed.
b. are higher than they would be if they were correctly indexed.
c. are constant.
d. are decreasing.
e. are under-indexed.
Suppose that initially the market for DVDs is at point A on demand curve D2 in Figure
3-7. If the price of DVD players increases,
Figure 3-7
a. the demand curve will shift to D3
b. the market will move to point B on demand curve D1
c. the market will move to point C on demand curve D1
d. there will be no change from point A
e. the demand curve will shift to D2
Suppose there are no firms, only the government and households. What would be the
result if for some reason the supply of saving at every interest rate suddenly fell?
a. Interest rates would fall and the level of saving would fall.
b. Interest rates would fall and the level of saving would not change.
c. Interest rates would rise and the level of saving would not change.
d. Interest rates would rise and the level of saving would fall.
e. Interest rates would not change and the level of saving would fall.
Investment spending is inversely related to the interest rate.
The production possibilities frontier can be used to illustrate all of the following
concepts, except one. Which is the exception?
a. productive inefficiency
b. opportunity cost
c. the law of demand
d. scarcity
e. the law of increasing opportunity costs
What happens to a production possibilities frontier (with capital goods on the vertical
axis and consumption goods on the horizontal axis) when there is technological
improvement?
a. The entire frontier shifts outward.
b. The upper part shifts outward while the lower part shifts inward.
c. Nothing; there is no movement of the frontier.
d. The entire frontier shifts inward.
e. The lower part of the curve shifts outward while the upper part shifts inward.
The principle of comparative advantage states that
a. whoever has a comparative advantage in producing a good or service also has the
absolute advantage
b. whoever has an absolute advantage in producing a good or service also has the
comparative advantage
c. whoever can produce a good or service using fewer resources than another individual
has the comparative advantage
d. total production of every good or service can be greater if individuals specialize
according to their comparative advantage
e. comparative advantage is maximized if each individual specializes according to his
or her absolute advantage
To stabilize real GDP, the Fed must increase the money supply in response to a
a. positive demand shock
b. low level of unemployment
c. sudden upsurge in inflation
d. rise in the interest rate
e. negative demand shock
